Integrating Social Media and Customer Relationship Management

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By Alison Diana

Social Media Advances CRM to Increase Revenue, Market Share and Brand

Initially viewed by some as the bane of corporate infrastructure and a drain on employee productivity, social networking sites now are increasingly being tapped as a way to directly funnel consumer engagement into businesses' customer relationship management (CRM) software solutions.

Those organizations willing to invest the time and resources required to develop and support a strong virtual presence are gaining practically unlimited access to consumers' steady outpouring of raves and rants, toward favorite and disliked companies and products. Tying this invaluable data into a CRM solution generates sales leads, ideas for product direction and strengthens a company's image and brand.

Social media is on an undeniable growth trajectory. Analyst firm Gartner predicts "The worldwide market for enterprise social software will top $769 million in 2011, up 15.7% from the $664 million spent in 2010." Forrester echoes these findings in its 2010 Midyear Planning report, "Social media spending is expected to grow at a compound annual growth rate of 34% over the next four years."

In fact, within the next two years, social networking sites - like FaceBook, LinkedIn and Twitter - will be more powerful than corporate websites or standalone CRM, according to a report by Jeremiah Owyang, when a Forrester senior analyst. Social CRM, however, unites both tools, creating a CRM solution that allows sales, marketing, public relations, support, legal and product development, perhaps, to listen in to and interact with consumers, prospects and customers.

As a result, those companies that use the strongest social CRM integrations should increase revenue; expand market share; improve their corporate image and, maybe, even fine-tune product development to offer items with the most wished-for features or capabilities.

Social Status
While some businesses are leery of allowing, never mind promoting, employees' social website usage, other organizations have successfully embraced these sites and - at least in one report - seen sales increase as a direct result. The most successful organizations developed strategies such as, centralized coordination; creating different faces for different sites; carefully selecting the sites to participate in; encouraging employees to participate, and making social media part of the job, like email, according to a July 2009 report - "The World's Most Valuable Brands: Who's Engaged" - by Wetpants/Altimeter Group.

The report praised the efforts of SAP, a pre-recall Toyota, Dell and Starbucks as leaders in the integration of social networking sites and achievers of true business benefits. This is not surprising, since 60% of Americans use social media - and 33% state they have a stronger connection with those companies that they interact with on these sites, one published report found.

It's hard to remember, but in the web's early days, some businesses firmly prevented employees from accessing the Internet, a move widely viewed as short-sighted.

Value Proposition
Other businesses are seeing the value and plan to spend about $55 billion on interactive marketing, according to Forrester. Marketing is becoming more important, too, with 40% of 204 marketing professionals polled saying marketing is clearly capitalizing on social media and becoming a strategic leader in their companies. While social media only accounted for $716 million of the $25 billion of marketing dollars spent last year, social media will enjoy 34% compound annual growth rate (CAGR) through 2014, Forrester predicted.

More than half of Americans believe a business should have a strong social network presence, and more than half also say companies should use these sites to communicate with consumers.

The Big Switch
Unlike traditional CRM, which creates vast internal databases of clients and prospects, social networking sites are external repositories of direct communication and indirect comments about businesses, products, people, experiences and an array of customer sentiment. Therefore, CRM software developers are creating tools that allow companies to locate, absorb and use the thousands or millions of messages about their company, products, advertising campaigns or reputation.

At little cost or effort, a business now potentially can reach far more customers or prospects. Opinionated social networking users become a virtual focus group, praising or complaining about a company's offerings, and coming up with suggestions for improvements or new products or brands. Social CRM also allows a company to track - and interact with - those who are vocal in their displeasure with a given product, service or brand.

Service calls may drop, too, as consumers reach out to their personal networks as the first round of contact for a technical question or how-to query. Savvy responders also become a company's asset, perhaps becoming thought-leaders or go-to resources in product developments.

Gartner recommends companies spell out the value; recognize customers have control; distinguish between members and reward certain members, and tap the right people, be it psychiatrists and anthropologists as well as sales, marketing and IT, said research director Adam Sarner, in The Business Impact of Social Computing on CRM, published last spring.

Building Blocks
The goal is to build on the success of CRM solutions, adding the 'social' capability and enhancing the overall customer experience and revenue-creation opportunities. To accomplish this, companies should create customer-focused online communities with well-established components like blogs, forums, chats and wikis. Businesses also need to monitor social networking sites, recognizing and rewarding - often with badges, stars or other low-cost measures - those who are most proactive and communicative about a company's products or services.

In addition, social CRM should incorporate the strong workflow capabilities of traditional CRM software systems, otherwise all this important data may be relatively useless. Businesses must ensure all relevant departments and individuals have access to the information streaming into their computers via active social networks. Likewise, executives want results, they want to see if their investment has a direct correlation with the goals of increased revenue, decreased support, expanded market share and enhanced brand. So it is imperative that social CRM includes business intelligence or analytical tools that measure success and help guide any corrections or enhancements along the way.

Unlike a strong corporate website, businesses should tap the boundless, less structured and uncontrolled world of social media. Those communicating about a company or brand may never visit the company's home page, preferring to disseminate their comments, opinions and suggestions from LinkedIn to FaceBook. Social CRM then, must go to the source, not try to bring the source to it.

Here, There, Everywhere
Targeting this rich, growing live community is challenging - but rewarding.

Already, 47% of North American businesses polled claimed a sales increase because of social networking, according to a report by Coleman Parkes Research for Avanade. In order, other benefits included: improved feedback (86%); reduced time spent on support (83%); created perception of being a forward-looking company (84%); improved market reputation (70%), and improved customer satisfaction (65%), the study found.

As social networking sites become even more plentiful, a company without a social presence - and the social CRM tools to leverage those relationships, will become a rarity - the latest version of a business without a website. If one of those still exists.

CRM systems have been historically developed for the C-suite; to track their sales teams progress and performance. This has resulted in requiring sales reps to enter and manage data so the execs could compile and learn from that data. Good for the execs but not nearly as helpful for the sales reps, who don't want to enter data, but instead want to consume information. I think social CRM is restoring some of the balance. The more social CRM systems are using consumer technologies which makes them much easier to use, and are adopting push-technologies such as RSS feeds and activity updates to deliver real-time notifications to the sales pros. This is a big step forward. If this social style can be integrated with back office systems so sales pros can get instant product availability, verify customer credit terms, process quotes, initiate sales orders and the like, CRM systems may finally achieve nirvana and benefit both the sales reps and their bosses.

Imad Kutron

Why do most companies implement social media programs?

Denise Holland

Social media objectives are unique to each company. With that said, I think many social media adopters are lured by the opportunity to create buzz, conversation and engagement that then convert into attention, awareness and buyer preference. While I think these are helpful to a company's demand generation, customer acquisition and revenue building programs, I don't believe they are solid end goals. In my opinion, more explicit, bottom-line end goals such as increased revenues make social media programs more measurable and sustainable.

Jared Nimmes

Very helpful article. I'm trying to justify a social crm project with internal projections, and also referencing business performance from other social media adopters, and not finding much. Any suggestions?

Denise Holland

Harvard Business Review posted some social media performance data on its blog from a Babson Executive Education survey about the use of social media as it relates to business performance. Out of a field of 900 people, the survey identified what it called "Social Media Customer Leaders" by their response to the statement "Our organization has embraced social media (like Twitter, blogs and Facebook) to improve its responsiveness to customer needs." The people who strongly agreed were designated social media customer (SMC) leaders; those who strongly disagreed were deemed SMC laggards. The survey then compared business performance of leaders to laggards and came up with some interesting data points. 21% of the leaders' businesses experienced flat or declining sales, versus 31% of the laggards. Only 5% of SMC leaders' grew by more than 25%, but that rate is twice that of the laggards. And two-thirds of the leaders strongly agreed with the statement "We are more effective meeting customer needs today compared to 18 months ago," while only a third as many laggards said the same thing. While this does not mean that embracing social media leads to better performance, it's clearly a sign of organizations that understand that customers prefer to have contact with the companies they buy from delivered in the form of their choosing. That may be Twitter, a blog, Facebook, or something else – but if your company is serious about being customer-centric, it will make an effort to be there when the customer wants to speak in whatever channel that may be. Customer-centricty clearly leads to better business performance. And it makes sense that laggards don't get this and want to keep behaving in business-centric ways, expecting the customer conversation to come to them in their company controlled channel. Not surprisingly, the survey found that leaders strongly agreed with the statement "My company puts more emphasis on innovation and growth today than before the recession" 43% of the time, versus 17% for the laggards, suggesting that there needs to be an innovation culture in place to encourage and sustain the use of social media and social CRM.

Joanne Walthman

We're in a similar business case justification project. The Harvard study is a good reference, but how do you get down to the detail of putting a value on responding or not responding to negative customer complaints (which escalate to viral rants if not controlled)?

Denise Holland

I think they're are at least three response points to your question. First, calculating the metrics down to a transaction level will be the result of a unique combination of variables related to your business. I don't think you'll find industry metrics that will provide you the definitive basis for the business case justification you may be looking for. Sorry, no shortcuts on this one. Second, I would suggest referring to the same metrics already experienced in your business but through different channels. For example, what is the cost of a lost customer who leaves your business because of a poor call center experience? These existing metrics can be extrapolated to social media. Lastly, it's important to remember that social media, or social CRM, is not just a support channel, even though that is how it most commonly used. While many companies adopt social CRM with a focus on social stream monitoring and response, in order to lower customer support costs or keep negative comments from going viral, this is a small portion of a much larger social business strategy, and a small payback when compared to the more strategic upside benefits such as increased customer share, expanded market share, improved up-sell and cross-sell, rise in customer lifetime value and on and on. The transaction metrics are important, but the sell should be on the strategic benefits which are generally nothing short of business transformation.

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60% of Americans use social media—and 33% state they have a stronger connection with those companies that they interact with online.